Many people assume that a pension automatically forms part of their estate and passes according to their will. That is not necessarily how pension death benefits work.
The treatment of a pension depends on the type of pension, the scheme rules, your age and circumstances at death, and the decisions made by the pension provider or scheme trustees.
Who receives your pension?
For many private pensions, you can nominate someone to receive death benefits. GOV.UK explains that the person who died will usually have nominated a beneficiary with their pension provider. However, the provider may sometimes pay someone else depending on the scheme rules and circumstances.
This means your pension beneficiary nomination should be reviewed alongside your will rather than treated as an afterthought.
Does your pension follow your will?
Not necessarily.
Your will deals with assets that form part of your estate, whereas many pension arrangements operate under their own scheme rules. Consequently, simply naming someone in your will does not necessarily mean that person will receive your pension death benefits.
Keeping beneficiary nominations up to date can therefore be an important part of estate planning.
What about tax?
The tax treatment of inherited pension benefits can depend on several factors.
There is also an important upcoming change.
From 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a person's estate for Inheritance Tax purposes. Finance Act 2026 has legislated for these changes.There are exceptions. For example, death-in-service benefits payable from registered pension schemes are excluded from these Inheritance Tax changes.
The rules surrounding income tax on inherited pension benefits are separate and can also depend on the circumstances.
Why should you review your pension?
Estate planning is not simply about writing a will.
You should consider:
Your current pension provider
Your nominated beneficiaries
Whether your beneficiaries' circumstances have changed
Your wider estate
Life insurance
Property ownership
Potential Inheritance Tax
The upcoming pension tax changes
Marriage, divorce, separation, the birth of children and the death of a beneficiary can all be reasons to review your arrangements.
What should executors know?
If you die with pension benefits, your personal representatives may need to identify pension arrangements and provide information when dealing with the estate.
From April 2027, personal representatives will have responsibilities relating to reporting and paying Inheritance Tax on pension benefits that fall within the new rules. Conclusion
Your pension can be an important part of your estate planning, but it should not be considered in isolation. Beneficiary nominations, pension scheme rules, income tax and the upcoming Inheritance Tax reforms can all affect what happens after death.
Reviewing your pension arrangements alongside your will can help reduce uncertainty for your family.